Robert Hawthorne, Inc. v. Director of Int. Rev.
| Decision Date | 03 March 1976 |
| Docket Number | Civ. A. No. 74-2874. |
| Parties | ROBERT HAWTHORNE, INC. v. DIRECTOR OF INTERNAL REVENUE and United States Department of Justice, Eastern District of Pennsylvania. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
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Wilbur Greenberg, Philadelphia, Pa., for plaintiff.
J. Clayton Undercofler, 1st Asst. U. S. Atty., Robert E. Curran, U. S. Atty., for defendants.
This case concerns allegations of governmental bad faith in connection with a federal grand jury investigation, alleged breach of the secrecy of the grand jury, and allegedly unlawful retention by the grand jury of certain records of the plaintiff. The investigation in question relates to possible violations of federal statutes in connection with the award of contracts by the City of Philadelphia and related governmental authorities.1 Plaintiff, a demolition contractor, originally came under scrutiny because it was one of many firms which had done business with those entities. It has now become a target of the investigation, both as to its contracting activities and as to possible federal income tax violations. In the proceedings before us plaintiff seeks injunctive relief against the continuation of the investigation, at least as to plaintiff. Alternatively, plaintiff seeks to restrain the alleged breach of the secrecy of the grand jury involved in the disclosure of certain subpoenaed material to the Internal Revenue Service (I.R.S.), pursuant to order of this court, and to recover a large number of its corporate records which have been the subject of omnibus subpoenas and which now repose in the offices of the I.R.S., though under the aegis of the United States Attorney.
The allegations of plaintiff's complaint are manifold. However, distilled to their essence they raise three significant points: 1) that the manner in which the Justice Department has conducted the investigation constitutes an abuse of the grand jury process;2 2) that the secrecy of the grand jury, protected by Rule 6(e) of the Federal Rules of Criminal Procedure, has been breached by improper issuance or violation of judicial orders entered pursuant to that rule, granting access to plaintiff's subpoenaed records to I.R.S. agents assisting the U.S. Attorney in the investigation;3 and 3) that records belonging to the plaintiff have been improperly retained by the government. The government emphatically denies that it has acted in bad faith, abused the grand jury process, violated Rule 6(e) orders, or improperly refused to return plaintiff's records.
When the parties first came before us the plaintiff sought far more limited relief: a return of its records and an order restraining government agents from interviewing those with whom plaintiff had business dealings. When it appeared, after several conferences, that the matter could not be adjusted amicably, we stated that we would dispose of it on affidavits. In due course, the complaint was amended to allege much broader grounds for relief.4 However, even after the amendments, we believed that the matter could be disposed of on affidavits; hence, we requested from the government and received a considerable number of additional affidavits covering every aspect of plaintiff's allegations.5 When it appeared that there were still certain disputed issues of fact, we augmented the record by taking testimony at a final hearing.
As will be seen, we feel discomfiture over the prolongation of this grand jury investigation, and much dissatisfaction with the government's procedures for keeping records in connection with grand jury investigations, and have some suggestions to make in those regards. However, because we find no actionable abuse of the grand jury process and no ultimate impropriety in retention of certain records under the circumstances we deny relief on those claims. Neither do we find that the government has breached the secrecy of the grand jury or violated a Federal Criminal Rule 6(e) order. However, because we are concerned as to the manner in which the Rule 6(e) orders were implemented in this case and apparently in general, we also offer some suggestions in that area. We feel further judicial explication on this point by us is not inappropriate in view of the fact that the sole authority cited by the parties as the frame of reference for determining compliance with a Rule 6(e) order is our own opinion in the case of In re Grand Jury Investigation William H. Pflaumer & Sons, Inc., 53 F.R.D. 464 (E.D.Pa.1971) (hereinafter Pflaumer).
Before discussion of these substantive issues, we must first set forth our findings of fact, which are based upon the affidavits submitted by the parties and upon the testimony offered at hearing. Because of the broad based attack made by the plaintiffs on the manner in which grand jury proceedings are conducted, we first make findings on that general subject. We then set forth our findings on the specifics of the Hawthorne investigation, implementation of the 6(e) orders and the retention of records, after which we discuss the applicable law.
An affidavit filed by the United States Attorney for the Eastern District of Pennsylvania sets forth in great detail the procedures followed in this District in the conduct of a grand jury investigation. The affidavit also recites the procedures followed in connection with orders issued under Fed.R.Crim.P. 6(e). The affidavit is uncontroverted, and our findings based thereon now follow.
Grand juries are summoned by the Court. Thereafter, they meet on a weekly basis on the same day of each week.6 The scheduling of matters coming before the different grand juries (there are presently four sitting grand juries) is centrally coordinated by two Assistant United States Attorneys working in conjunction with the Clerk's office. Matters are selected for grand jury attention by varying methods. Suggestions for grand jury investigation may originate from the United States Attorney's office, from the grand jury, from a particular investigating agency, or from the public. Ultimately, the decision on what comes before a grand jury is made by the United States Attorney's office or by the grand jury, with the caveat that the grand jury always has the ultimate right to refuse to hear anything brought before it by the United States Attorney's office acting on its own.7
Every matter that is determined appropriate for grand jury investigation, if not already being considered by an investigating agency, is referred to the federal investigating agency statutorily designated with the enforcement of the suspected offenses. Thereafter, the grand jury investigation proceeds in conjunction with the efforts of that particular agency. The investigating agency performs such necessary functions as exploring leads and allegations and interviewing witnesses outside the grand jury, gathering and reviewing documentary evidence, and writing investigatory reports. A complete field investigation by the appropriate federal agency is usually required so that the grand jury's investigation may be as thorough and expeditious as possible.
Grand jury subpoenas requiring the appearance of witnesses or the production of records are prepared by the United States Attorney's office. The determination of who or what will be subpoenaed is made either by the United States Attorney's office or the grand jury, or through a combination of the two in discussion.8 Subpoenas, however, are not the exclusive means for the production of evidence, documents or testimony in connection with a grand jury investigation. Frequently, relevant parties and their counsel voluntarily produce evidence or documents without the necessity of subpoena.
The United States Attorney's office and the grand jury have accepted compliance with subpoenae duces tecum for the production of records in a variety of ways. Normally, the party furnishing records produces the records at the grand jury room and that party is requested to testify concerning delivery of the records specified in the subpoena but not furnished. Dependent upon the circumstances of the particular matter, however, the nature of the records subpoenaed, the volume of such records and the necessities and operations of the subpoenaed party, the United States Attorney's office may agree with subpoenaed parties and their counsel that compliance with the subpoena be satisfied in some other manner.9 Often, where documents are voluminous, the United States Attorney's office agrees to accept compliance with the subpoena by the furnishing of the records in accordance with a mutually agreeable schedule. Voluminous records are rarely brought inside the grand jury room; rather, they are delivered to the vicinity of the grand jury room or are supplied as set forth in footnote 9.10
It appears that documents initially received pursuant to subpoenae duces tecum are not generally of substantial probative value per se. Such documents and records must be received, analyzed, compared, studied and understood before they meet the investigative or evidentiary demand for which they were subpoenaed and before meaningful presentation of the contents of such records can be made to the grand jury. Because of the need to accomplish the maximum effective use of the grand jury's time, the United States Attorney's office does not review and analyze subpoenaed records in the grand jury room or in the presence of the grand jury. For the most part, analysis and examination of subpoenaed records is performed neither by the Assistant United States Attorney assigned to the investigation nor by members of the United States Attorney's office.11 Agents...
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